New Naira Note:CBN Records 95% Decline In Banks' Deposit

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The redesign of naira note has led to a 95.9 percent decrease in  Commercial banks’ deposits with the Central Bank of Nigeria (CBN), known as Standing Deposit Facility (SDF).

According to the data obtain from the CBN’s website,banks’ deposit with their regulator (CBN) dropped to N4.69 billion as of April 4, 2023 from N112.24 billion in February 10, 2023.

 According to CBN,deposit and lending are instrument of liquidity management.



On October 26, 2022, the Central Bank of Nigeria (CBN) announced that the high Naira value of N200, N500 and N1,000 would be redesigned and introduced into the economy from December 15, 2022 while commercial banks were directed to return existing denominations to the CBN.

The public had until the deadline of January 31 (extended to February 10 and 17) to return the old currency to commercial banks. The CBN also limited over-the-counter cash withdrawal to N100,000 and N500,000 per week for individual and corporate organisations, respectively.

This was subsequently increased to N500,000 and N5,000,000 respectively. New Naira notes were printed but were not circulated effectively. This created panic among citizens as the old notes were declared to no longer be legal tender.

Analyst at FSDH Research in a new report said,“Poorly executed Naira redesign policy led to a cash crunch across Nigeria.

"Many individuals have lost trust in several banks due to sub-optimal performance of payment platforms and rationing of cash withdrawal."

Speaking on the cash crisis,Muda Yusuf, chief executive officer, the Centre for the Promotion of Private Enterprise (CPPE), said it had a huge effect on bank customers' confidence regarding cash deposits.

According to him,it would take some time for this confidence to be restored.

“The reality is that the cash situation is yet to normalise. Though the scarcity has eased, cash availability is still an issue. Until the cash supply gets to a saturation point, it will be difficult to convince the citizens to deposit their cash in the banks.

“This is one of the unintended consequences of the poorly implemented cash redesign policy of the CBN. What we are witnessing is the exact opposite of what the cash-less policy was meant to achieve. There is likely to be an increase in the amount of cash held outside the banking system. But we could see a reversal if access to cash eases considerably,” Yusuf said



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